Why Trump’s Health Care Plan Will Fail

Donald Trump—along with some Republican leaders—says he wants to keep certain parts of Obamacare, such as letting young adults stay on their parents’ plans through age 26 and banning pre-existing condition exclusions. Coupled with the plan that Trump recently unveiled on his website—a grab-bag of hoary Republican talking points–these comments show how little Trump knows about health care.

Take the pre-existing exclusion ban, for example. As New York State proved years ago, requiring the guaranteed issue of coverage without a mandate to buy it makes individual health insurance unaffordable. Insurers must raise their rates if not enough healthy people buy their product or if people can wait until they become acutely ill before they seek coverage.

Selling insurance across state lines is another Republican replacement for rational thought. If people are allowed to shop for insurance across state lines, insurance companies will set up plans in the state that regulates insurance the least—say, Mississippi. Then they’ll sell cheap, skimpy plans across the country. Unfortunately, their customers will discover that those plans cover very little when they get sick.

In addition, the plans that are selling coverage in Mississippi would need to create provider networks all across the country. That would be a gargantuan task, and the insurers would likely build the same kind of narrow networks that Obamacare has been criticized for. The net result: crappy coverage and little choice.

The piece de resistance of the Trumpian healthcare plan is more consumer-directed plans with health savings accounts (HSAs) and high deductibles. HSAs are tax-favored accounts that can be rolled over from year to year and can be used to pay for medical expenses. They may be funded jointly by employers and employees or solely by individuals. These consumer-directed plans have expanded under Obama, and Trump wants to encourage them to grow further.

Employers sponsor consumer-directed plans as a cost saving measure. The idea is that employees, required to spend the money in their HSAs until they reach the deductible, will shop around for lower prices and will abstain from seeking unnecessary care. There’s evidence that the latter is true, but that can be a problem if people don’t seek the care they need. Also, people with advanced chronic diseases are likely to go through their HSA before they reach the deductible limit. And when people get really sick, they’re not likely to shop around; in most cases, they won’t have much choice in how much their care will cost.

People who work at low-wage jobs are unlikely to have a consumer-directed plan available. Even if they did have access to one, they couldn’t afford to fund the HSA; their employer would have to do it, and that would be unacceptable to businesses that pay minimum wage.

Poor people who can’t afford private insurance may be eligible for Medicaid. But many states severely restrict Medicaid eligibility. The Affordable Care Act (ACA) changed that by requiring that Medicaid cover everyone with less than a certain income and by raising the income ceiling for eligibility. In the states that expanded Medicaid with federal funds, there is no gap between Medicaid coverage and the eligibility to buy insurance on the health insurance exchanges with federal subsidies—a wondrous boon to the working poor.

To make American great again, Trump has decided to end this Medicaid expansion and to write the traditional Republican prescription for Medicaid: block grants to states. Then the states can decide how many people they want to cover. The 2015 Republican budget plan would have adopted block grants and cut the federal government’s contribution to Medicaid by nearly a trillion dollars over 10 years. The result would have been to throw out millions of people. This is a cynical and cruel approach, but it limits the federal government’s contribution to Medicaid and gives the states the flexibility they have long wanted. Only the poor lose.

Trump would also resurrect high-risk pools that, before the ACA, cost the states a lot to subsidize the purchase of insurance by people who were unable to get it from private insurers. Only a small portion of high-risk people were covered through these high-risk pools. This is how Trump plans to get people with preexisting conditions covered, but it won’t work if most of those folks can’t afford the coverage and states can’t afford to subsidize them all.

Finally, he’d allow individuals to deduct health insurance premium payments from taxes, just as businesses and self-employed people do.

According to a RAND analysis conducted before the election, Trump’s plan to repeal the ACA, provide a tax deduction for premiums, turn Medicaid into a block grant, and allow insurers to sell across state lines would together lead to about 20 million people losing their coverage.

The plain fact is that our President-Elect’s health care proposals are based on flimsy, outmoded ideas that won’t work. The reason why Republicans have supported these proposals for so long is that they think their “free-market” approach will give them what they primarily want: lower government spending on health care.

However, covering fewer people and giving them less health insurance won’t lower health costs. Without insurance or with poor coverage, millions of people will delay care until they have to go to the ER or the hospital. Also, unless Congress retains the parts of the ACA that focus on healthcare delivery reform, there will be less coordination of care, resulting in yet higher costs. If the federal government stops pushing value-based reimbursement, the key ingredient of cost control, the switch from pay-for-volume to pay-for-value will recede into the hazy future.

Without an all-out public-private assault on the seemingly intractable ailments that afflict our healthcare system, there’s no way to get health costs under control. And, with the government paying for more than half of the care delivered in this country, trying to move the burden to someone else will come back to bite us, the taxpayers.

Ken Terry is a healthcare journalist and the author of the book “Rx For Health Care Reform” (Vanderbilt University Press, 2007).

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10 replies »

  1. “We are in the midst of a giant Paradigm Shift.”

    That’s not proven by the numbers. 25% voted Trump, 25% voted Hillary – with a slight edge on popular vote, while 45% did not vote. The old paradigm of the electoral college gave the edge to Trump.

    I agree that basic community care is what’s needed for health struggling communities – but try to tell that to the new “paradigm” regime, which is just the old Republican paradigm suppressed by 8 years of Obama and obstructionism for anything coming from the White House.

    The South Shall Rise again!

  2. HSAs are efficient for paying known expenses for the year
    The Health Matching Account is the preferred accumulation tool for medical dollars double in 35 months
    Could not do this with cash: pooling and monthly crediting based on decades of claim experience

  3. Good question Barry
    We encourage people to first present their health insurance card to get credit toward their deductible
    They then swipe their Health Matching Account VISA debit card for the cash discount
    The insurer plays enough games, so this game is very tame in comparison

  4. The dialectic between the social mandate for our nation’s health care and the economic mandate continues. We are, appropriately, consumed by the connection between the cost of complex healthcare and the social mandate to offer available and accessible health CARE for the social mandate of each citizen’s HEALTH. NONE of this currently discussed tension will resolve the fundamental problems that exist for the social mandate to offer equitably available Primary Healthcare for the basic healthcare needs of each citizen, community by community. Currently, our nation’s healthcare is bankrupting our nation’s economy, AND nearly 400 women die annually with a pregnancy just because they live within the wrong nation’s healthcare system. So, we need to move from a new set of variations on the old themes for healthcare reform. The only strategy to improve the efficiency and effectiveness of our nation’s healthcare must first start with a nationally sanctioned and locally driven improvement in the health care for Basic Healthcare Needs, community by community. Then we can decide how to implement universal health insurance with provisions for a nationally funded stop loss process. Mind you, the Design Principles for managing a Common-Pool Resource (our nation’s economy) already exist. And, these Design Principles are the resultant product of thorough research.
    We are in the midst of a giant Paradigm Shift. The True Believers of the old paradigm are currently paralyzing our need to use the current disruption in our nation’s heritage to forge a new Paradigm for the health care of each citizen. OK, take a deeeeeep breath everybody! Voiced on an airplane 15 years ago, “Let’s GO!”

  5. Anish — I’m doubtful about whether young healthy single men would be willing to do that though those with family responsibilities might be. I also think it would be helpful if high deductible health insurance plans had a separate much lower deductible for prescription drugs. The Medicare Part D model but with maybe a $500 or even $1,000 deducible without the donut hole and 25% coinsurance beyond the deductible up to an OOP limit of $5,000 or so, makes sense to me.

  6. That’s why paying down the deductible doesn’t function as shopping and these monies have to be spent on the providers in the plan. This should make you sad: that all this OOP money spent does not do any good in bringng down prices. We have to have providers who accept credit/deductible-tally cards whose balance can be communicated to the patient’s mother plan as he approaches pay-down. Then, we can have real shopping….(because competitors will vie to be paid by this card.) There is one remaining question here. Can you guess what it is?

    PS We adjust prices all the time where we can. I think; at least I did. There are bad laws here. “Thou shall not charge anyone less than you charge MediCal” was one.

  7. Barry – ideally, pay 50-100/month to the physician – from the hsa. That subscription covers visits immunizations and labs.

  8. I have a simple question that perhaps one of the doctors in the trenches can answer. Suppose I have a high deductible health insurance plan coupled with a Health Savings Account. I come into your office early in the year for a routine office visit (99213 – established patient). Let’s say your full charge for that visit is $125 and my insurance plan’s contract reimbursement rate is $75. If I pay you directly without running the claim through my insurer, do I pay $75 or $125? Also, if I pay directly, how will my insurer know that I incurred the charge so I can get credit for it toward my deductible? If, instead, I have to run the claim through my insurer both to find out what the contract reimbursement rate is and pay that amount and to get credit toward the deductible, how does the need to incur that extra administrative hassle save money for the system or make it more efficient?

    If the patient doesn’t have insurance, the doctor or his staff can, in theory, just create a price on a case by case basis depending on the patient’s perceived ability to pay though I’m not sure how that would be determined. If the doctor is prohibited from disclosing his actual contract reimbursement rate and must bill every patient the same amount (full list price), how does the individual patient or the system overall benefit from Health Savings Accounts? The key to fixing this, I think, is a change in the rules around disclosure of contract reimbursement rates and an efficient mechanism for informing the insurer that the member has incurred a charge and paid it without having to run the whole thing through the insurance claims bureaucracy.

  9. We have to be shrewd.

    The provider should think that the patient is spending his own money. This doesn’t mean that we can’t be kind and altruistic and subsidize all we want. It also doesn’t mean that really sick people will have to present a face to the provider as if the government is paying for them.

    Think Medi-Buck vouchers. Think large HSAs (see CATO). Think indemnity-style insurance. Think being able to pay down deductbles to providers outside the plan.

  10. I’ve heard these arguments before the ACA was passed. The problems are valid. The problems are why americans twice voted for obama and his promises to fix them. The solution ended up being heavy handed mandates that economists in love with models and doctors in name only consultants (DINOs) endorsed. These solutions turned into checking boxes on screens and giving patient summaries that ended up in the trash half the time. None of which increased value to patients or decreased cost. Patients in ACOs do get their LDL checked more often. So in 7 years 1 out of a 100 patients may benefit. Great. The ‘affordable’ ACA also served to wipe out years of cost moderation in one fell swoop (this from the CMS report of cost curve being bent up due to the ACA). This experience may forever have cured me of the idea that well intentioned bureacrats/economists/DINOs from the center can fix the problems that ail us. I’m all for returning power to patients and physicians – that’s exactly what HSAs that can be used to directly pay phsyicians would do. It certainly won’t solve every problem – but its certainly a move in the right direction.